One Couple’s Experience

reposted from Maple Sandbox

Posted on August 14, 2012 by johnnb

We moved to Canada from the United States in 1968 and received what was then called Landed Immigrant Status.  My wife was with me and I was a draft dodger.

It became obvious to us after only a couple of years that we wanted to stay in Canada so we looked into getting Canadian citizenship.  At that time there was a mandatory five year waiting period before you could apply so we just continued to gather information.  We were told that becoming a Canadian citizen would, by US law, mean we lost out US citizenship and we were told that at the citizenship ceremony we would be required to sign a renunciation of our US citizenship.

In 1973 we applied for Canadian citizenship and had our interview with a citizenship judge.  The test then was simply a visit with this judge who asked questions and made a decision.  It was a very friendly process.  In November of 1973 we attended a citizenship ceremony where we became Canadians and swore an oath of allegiance to Queen Elizabeth II.  We also found out that signing the renunciation of US citizenship was no longer required (hadn’t been since April of 1973 because of a court decision.)  We still believed, however, that we were no longer US citizens.

We had been filing both Canadian and US income tax forms for the time we had been in Canada.  Early in 1974 we filed our Canadian taxes as usual and our final US tax form.  When we sent in the US form we enclosed a cover letter saying we no longer considered ourselves US citizens and would no longer be filing US tax forms.  We never filed another US tax form and we never heard back from the IRS or the US State Department.

In February of 1977 I received paperwork for the Selective Service Amnesty granted by then President Carter.  With the option of returning to the US available, my wife and I just stayed with our jobs and friends in Canada and never considered moving back to the US.  Our life was now fully in Canada.

We lived quiet lives for the next three decades travelling on our Canadian passports (never applied for nor had US passports) until the requirement to show a passport at the US border came into effect in the middle of 2009.  Most times crossing the border to visit family and friends was no problem but three times since this requirement came into effect we have had our Canadian passports handed back to us and were told we were US citizens because the passports showed US birthplaces.  No big deal was made of this and we didn’t argue with the border guards and they let us in with only our Canadian passports.  It was more or less a non-issue but it did set off a few alarm bells as we wondered how we could convince the border guards that we really weren’t US citizens anymore.

Through media stories we were very dimly aware that the US was cracking down on tax cheats holding overseas accounts.  We never thought of our accounts as overseas as we are Canadian and our money was in Canadian banks – a retired teacher and a retired lab tech.  Not the profile of persons hiding from the tax department.

In 2011 we were contacted by our financial advisor.  She said that because she knew us she knew that we had been born in the US and wanted to warn us that our RRSP accounts which held mutual funds could be problematic unless we could prove we were no longer US citizens when and if this new FATCA legislation came into effect.

Now we started to panic.  We knew we weren’t US citizens but how could we prove it?  We had never received anything official saying we weren’t.

There is a lawyer locally who was also a draft dodger and we know him slightly so we contacted him and he told us about Certificates of Loss of Nationality.  He also advised us not to approach the border unless we had one.  It was his opinion that without a CLN a border guard had only to ask if we had filed US income tax forms last year and if we answered truthfully “no” then we had just admitted to income tax evasion and if we lied and said “yes” we had just made a false declaration and if discovered we were also in trouble.  Nobody had been asked that question so it was a tiny risk but he advised against trying the border.  He also mentioned that when entering Puerto Rico he had been told it was illegal for US citizens to enter the US using anything other than a US passport.  Without the CLN he said it would take a court case to get recognized as no longer being a US citizen and we couldn’t afford that.

Then stories started appearing in the newspaper about it being almost too late to apply for amnesty for failure to file income taxes and that there was a program called OVDI which US citizens should join.  Now we were in full panic mode.  Were we really US citizens?  Surely not.  What was this CLN and how did you get one?  Should we be joining this OVDI?  We knew nothing about any of this stuff and we were scared.  It appeared our savings, modest as they were, could be wiped out and we could be denied entrance to the US to visit our families.

We spent two months trying to get to the point where we had some grasp of what was going on.  We found some websites:  Renunciation Guide, Expat Forum and then the newly founded Isaac Brock Society.  Without court cases everything we found was opinion and sometimes differing opinions.

We looked first at OVDI and the more we read the more it looked like a bad deal.  I had amnesty papers from draft dodging and I didn’t have to admit any wrongdoing.  OVDI was supposed to be an amnesty but we would have to sign a statement admitting guilt and assign ourselves a penalty of no less than five per cent on our accounts.  Since we didn’t feel we had done anything wrong this had no appeal and we agreed to stay away from OVDI.  Don’t know how that program has changed since last year but I would still be very cautious and read all the fine print before I had anything to do with it.

As far as taxes were concerned we thought that if we weren’t US citizens we shouldn’t have to have anything to do with them so we skipped the whole filing back taxes thing or becoming compliant and went directly to what it would take to get a CLN.

What people had to say about the Immigration and Naturalization Act of the US State Department was a bit more encouraging but also difficult.  Changes kept being made to the Act and then parts of them were made retroactive or amended due to court cases.

We were pointed to the section outlining seven things you could do which State considered “expatriating acts” which could lose you your US citizenship and we had done two of them:  Taking out citizenship in a foreign country and taking an oath of allegiance to a foreign head of State.  That was great.  We had believed that all along.  However, a 1986 court case changed this slightly so that performing the expatriating act was not enough.  Now you had to perform the expatriating act “…with the intent to relinquish US citizenship.”  How do we show what our intent was 39 years ago?  Do they have a mind reading machine?  There was also a shift in the thinking of the US State Department over the years.  In 1973 it seemed they wanted to punish draft dodgers and they did this by taking away their US citizenship.  We learned that some people wrote letters to State saying they had become Canadian and got a CLN back within weeks.  Wish we had known about that back when.  Today it seems they want to punish people by refusing to take away their citizenship!  Now it is no longer sufficient to inform them that you have performed an expatriating act.  You have to make an embassy or consulate appointment and fill out forms DS-4079 and DS-4081and bring a lot of documentation with you to the appointment and try to convince them that you had intent to relinquish.

Fortunately for us the approach the State Department takes is that actions speak louder than words.  Since your expatriating act have you done anything that would indicate you really wanted to keep US citizenship:  Traveled on a US passport? had a residence in the US? Paid taxes in the US?  Have you voted in a US election?  Registered your children as US citizens?  A whole list of these things which, if done after your expatriating act, indicate you did not intend to relinquish.  All this is on DS-4079.

Since we had done none of these things we made an appointment at the Consulate handed over all the forms and documentation and received our CLN’s twenty five weeks to the day after our appointments.  It very nicely says we performed our expatriating acts in Nov of 1973.  The consulate visit was friendly, professional and non-confrontational.

Because of a cute regulation from the IRS which says you expatriate not when you perform the expatriating act but when you inform the State Department (For us not 1973 but 2012) they may still think we are responsible for taxes for the past few years.  We strongly disagree and think it is up to State and not the IRS to determine who is and who is not a US citizen and when they ceased to be one.

Now we wait to hear about the IRS but we are very confident that they won’t bother us for so little and from so far back.  It might still come to a court case but we’ll probably let others who can afford it better fight that one.

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